A,B,C,D… OF STOCK MARKET

Presented by
Mr. Nilesh Karhade
1st Year MBA++
Dept. of Management Sciences
University of PUNE
Year – 2008-09
 Agenda
The Stock Market is a very
broad term which involves
trading of variety of entities.
This presentation provides
basics of some of the terms
& understanding of stock
market at macro level.
In this we will focus on only
shares in BSE
Introduction to stock
Types of Share
About Stock Market
Types of Market
Major Stock Exchanges
The role of Stock Exchanges
Bombay Stock Exchange
 Introduction to Stock

A stock is a small share that represents a partial ownership of a

company.

Stocks are issued by companies in order to raise capital.

Stock is also referred to as equity, & it is limited to particular

number of shares.
 Types of Share

Defensive Shares – These are the shares of stabilized &

mature companies. Over the years these companies have
standard practices for dividend payments.
Cyclical Shares – These are the shares of companies engaged
in trade cycle. During boom they do extremely well & during
recessionary phase, they hit the bottom.
Discount Shares – These are the shares whose market price is
lower than the par value or book value.
Growth Shares – These are the shares of those companies
whose assets, sales turnover & profits are growing rapidly.
 How capital is raised through
shares/stocks?

Issued Capital Reserved Capital

1. Registration for Authorized Capital.

Paid up capital
2. Amount divided into number of small
units/shares.
3. The units which are issued for sale out of
authorized capital are called Issued Capital
or Initial Public Offering.
 How capital is raised through
shares?

Issued Capital Reserved Capital

4. Out of Issued Capital, units which are

actually sold are called Paid-up Capital.
Paid up capital

5. Shareholders
 How capital is raised through
shares?

Issued Capital Reserved Capital

Example –
Paid up capital
Authorized Capital – Rs. 1 Crore
Issued Capital – Rs. 50 Lakhs
Paid-up Capital – Rs. 35 Lakhs
 About Stock Market

“Stock market” is a term used to describe the physical location

where the buying and selling of stocks take place.
The correct term to be used in pertaining to the physical
location for trading stocks is “stock exchange.”
The Stock market in India consists of about approx. twenty two
stock exchanges.
The stock exchanges constitute a market where securities
issued by the Central & State Govt., Public bodies & Joint Stock
companies are traded.
 Types of Market

Primary Market – In this new issues of equity & debt are

arranged either publicly or privately.
Secondary Market – The market where existing securities are
traded.
Future Market – It is a market of contracts where goods are
bought & sold at specified prices & times.
Options Market – It is similar to future market i.e. it is a contract
that gives the right, & not the obligation, to trade a stock at a
certain price before the specified date.
 What is Bulls & Bears Market?

Bulls Market - Bull markets occur when a particular nation experiences

high economic production, low unemployment level, and low inflation
rates.
 What is Bulls & Bears Market?

Bears Market – It follow the down trends in the economy. Such indicators
of economic downfall are increased unemployment and inflation. These
causes the fall of stock prices.
 Major Stock Exchanges
Market Value Total Share Turnover
Region Stock Exchange
(trillions of US
(trillions of US dollars)
dollars)
Africa JSE Securities Exchange 0.94 0.349
Americas NASDAQ 4.39 12.4
Americas São Paulo Stock Exchange 1.4 0.476
Americas Toronto Stock Exchange 2.29 1.36
Americas/Europe NYSE Euronext 20.7 28.7
Asia-Pacific Australian Securities Exchange 1.453 1.003
South Asia Bombay Stock Exchange 1.61 0.263
Asia-Pacific Hong Kong Stock Exchange 2.97 1.7
Asia-Pacific Korea Exchange 1.26 1.66
South Asia National Stock Exchange of India 1.46 0.564
Asia-Pacific Shanghai Stock Exchange 3.02 3.56
Asia-Pacific Shenzhen Stock Exchange 0.741 1.86
Asia-Pacific Tokyo Stock Exchange 4.63 5.45
Europe Frankfurt Stock Exchange (Deutsche Börse) 2.12 3.64
Europe London Stock Exchange 4.21 9.14
Europe Madrid Stock Exchange (Bolsas y Mercados Españoles) 1.83 2.49
Europe Milan Stock Exchange (Borsa Italiana) 1.13 1.98
Europe Moscow Interbank Currency Exchange (MICEX) 0.9652 0.4882
Europe Nordic Stock Exchange Group OMX1 1.38 1.6
Europe Swiss Exchange 1.33 1.58
Ref. – www.wikipedia.org
 The Role of Stock Exchanges

Raising Capital for Business – It facilitates companies to raise

capital through selling of shares to the investing public.
Mobilizing savings for investment – When people invest in
shares it leads to most rational allocation (agriculture,
commerce, industry), as otherwise it remains idle in deposits
with banks.

Bombay Stock Exchange Frankfurt Stock Exchange Hong Kong Stock Exchange London Stock Exchange
 The Role of Stock Exchanges

Facilitating company growth – Companies views acquisition as

an opportunity to expand their horizon. Stock market is one of
the simplest and most common ways for a company to grow by
acquisition or fusion.
Creating investment opportunities for small investors – It
enables small investor to invest in shares as per their
affordability.

Madrid Stock Exchange Mexican Stock Exchange Osaka Securities Exchange Philippine Stock Exchange
 The Role of Stock Exchanges

Government capital-raising for development projects – It may

decide to borrow money for several projects (sewage & water
treatment, housing) by selling securities known as bonds.
Barometer of the economy - Movement of share prices and in
general of the stock indexes can be an indicator of the general
trend in the economy.

Shanghai Stock Exchange SWX Swiss Exchange Tokyo Stock Exchange Toronto Stock Exchange
 Bombay Stock Exchange

Established as "The Native Share &

Stock Brokers' Association" in 1875
Oldest stock exchange in Asia.
Today, BSE is the world's number 1
exchange in terms of the number of
listed companies & worlds 5th in
transaction numbers.
BSE has two of world's best
exchanges, Deutsche Börse and
Singapore Exchange, as its
strategic partners.
 Bombay Stock Exchange

The BSE Index, SENSEX, is India's

first stock market index that enjoys
an iconic stature , and is tracked
worldwide.
 SENSEX
BSE Sensex is a value-weighted
index composed of 30 stocks.
It consists of the 30 largest and SENSEX 24 Sep 08 / 16:45
most actively traded stocks,
representative of various sectors.
SENSEX is calculated using the
"Free-float Market Capitalization"
methodology
The base period of SENSEX is
1978-79 and the base value is 100
index points.
SENSEX is calculated every 15
seconds.
 How Stocks are priced?
Latest Change 52 Weeks

symbol price net % time high low volume high low

BCE 31.15 -0.5 -1.5 16:57 31.75 31.1 3,643,000 33 27.2

BGM 17.06 -0.3 -1.6 15:54 17.3 17 207,400 26.9 17.1

IBM 79.82 -0.3 -0.4 16:01 80.68 79.6 4,999,200 99.1 71.9

MSFT 24.67 -0.3 -1.2 16:00 25.05 24.7 73,696,700 27.9 23.8

Stock Quote Table

First Column indicates abbreviation of name of company.

Latest Price indicates current price or closing price of the day (if in
newspaper)
Change (net) is difference between the previous day closing price &
current stock quote.
 How Stocks are priced?
Latest Change 52 Weeks

symbol price net % time high low volume high low

BCE 31.15 -0.5 -1.5 16:57 31.75 31.1 3,643,000 33 27.2

BGM 17.06 -0.3 -1.6 15:54 17.3 17 207,400 26.9 17.1

IBM 79.82 -0.3 -0.4 16:01 80.68 79.6 4,999,200 99.1 71.9

MSFT 24.67 -0.3 -1.2 16:00 25.05 24.7 73,696,700 27.9 23.8

Stock Quote Table

High indicates the highest price while low indicates lowest price of the
stock sold.
Volume describes the no. of shares traded for that day.
The 52- week high & low shows the highest & lowest prices in the
previous year.
How Stocks are priced?

PE – Price to Earning ratio. Price per

share divided by earning per share.
 References

1. Stock market in India by D. R. Veena

2. Investment management by Dr. Mittal & Dr. Agarwal
3. The working of stock exchanges in India by H.R. Machiraju
4. The investment game how to win by Prasanna Chandra
5. Managing Investment by Prasanna Chandra
6. Managerial Economics by Dr. Mukund Mahajan
7. www.bseindia.com
8. www.stockmarketbasics.com
9. www.wikipedia.org
10. www.sharekhan.com
Thank You!!

Questions??